Unlike the previous research, the principal findings of this thesis support the premise that retail marketplace on the Internet is more competitive than the brick-and-mortar marketplace. For the retail pharmacy market, I found that online price levels were lower for both over-the-counter and prescription drugs; the prices for the former were more dispersed online, while the prices for latter were less. As predicted, however, prices for pharmaceutical products changed less frequently online. It is not entirely clear, however, that the reduction in price volatilities in the Internet retail market is the result of the reduction of online retailers' ability to price discriminate, even though a test of relative ranks provides some evidence that this may be so. Lastly, mixed evidence supporting menu cost theory was found.